Negative basis

{
  "id": "MLC-T-INS-002286",
  "term": "Negative basis",
  "field": "Insurance and risk management",
  "definition": "A condition in credit markets in which the credit default swap spread on an issuer is narrower than the credit spread on the issuer's bond, so protection costs less than the bond's yield pickup over the risk-free rate. A negative basis trade buys the bond and buys swap protection against default on it, locking in the difference as a low-risk return. The basis is measured as the swap spread minus the bond spread.",
  "url": "https://mlchart.com/terminology/insurance/negative-basis/"
}